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Administrative cooperation in the field of VAT

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Administrative cooperation in the field of VAT

SUMMARY OF:

Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax

WHAT IS THE AIM OF THE REGULATION?

It sets out procedures allowing European Union (EU) Member States’ authorities to work together and share information on value added tax (VAT) and to combat VAT fraud. It thus ensures that:

VAT is assessed and applied correctly;
VAT fraud is detected and prevented;
VAT revenue is protected.

KEY POINTS

Central liaison offices

Member States each designate a central liaison office as a contact point for the other Member States and the European Commission. The office must keep a list of designated officials and liaison departments that can share information with their counterparts in other Member States. Where officials or liaison departments receive a request or reply to a request to send information, they must inform their central liaison office.

Sharing information

Countries can request information from another Member State using a standard form to allow them to correctly assess a cross-border transaction. Requested authorities must reply to requesting authorities within 3 months of receiving a request or within 1 month if they already have the information available.

Certain information is shared automatically when:

information from the Member State of origin is essential for the control system of the Member State of destination where taxation will take place;
there is reason to believe that there has been, or will be, a breach of VAT legislation in the Member State of destination;
there is a risk of tax loss in the Member State of destination.

Member States may also share information spontaneously and may request feedback from the countries with which it is shared.

Member States may refuse to provide information where:

requests for information within a specific period from the requesting authority impose a disproportionate burden;
the requesting authority has not exhausted the usual sources of information;
it would lead to the disclosure of a commercial, industrial or professional secret or is against public policy.

Storing information

Each Member State must store the following up-to-date information for at least 5 years:

information provided in the recapitulative statements (lists of people to whom they have supplied goods) submitted by taxable persons identified for VAT purposes;
data on persons to whom the Member State has issued a VAT identification number;
data on VAT identification numbers that have become invalid;
information on non-established taxable persons.

The information is then shared with all Member States through an electronic system, the VAT information eExchange system (VIES).

Regulation (EU) 2020/283 introduces an amendment requiring the Commission to develop, maintain, host and technically manage a central electronic system of payment information (CESOP) to investigate suspected VAT fraud or to detect VAT fraud. CESOP will store the payment data collected by Member States and aggregate it per beneficiary, as well as cross-check it with the other information exchanged under Regulation (EU) No 904/2010. Data in CESOP will only be made available to anti-fraud experts of Member States. This will apply from 1 January 2024.

Directive (EU) 2020/285 introduces simplified rules to reduce the administrative burden and compliance costs for small businesses and to create a more advantageous tax environment to help them grow and trade across borders more efficiently. Small businesses will be able to qualify for simplified VAT compliance rules where their annual turnover remains below a threshold set by the Member State concerned, which cannot be higher than €85,000. Under certain conditions, small businesses from other Member States, which do not exceed this threshold, will also be able to benefit from the simplified scheme if their total annual turnover in the whole of the EU does not exceed €100,000. These new rules apply from 1 January 2025.

VAT refunds

Member States forward the applications for VAT refunds they receive from taxable persons established in other Member States to the authorities of the refunding Member States concerned. This is done electronically within 15 days from the date of receipt of the application. The authorities of the refunding Member States must notify the authorities of the other Member States if:

they require additional electronically coded information on the nature and services of the applicants; or
they require the applicants to provide a description of their business activities by using harmonised codes.

Non-EU countries

If the assistance arrangements with the non-EU country in question allow it, the relevant authority of a Member State may forward information it receives from that country to any Member State that requests it or to any other Member State to which it may be of interest. Member States’ authorities may forward information to non-EU countries if:

the Member State from where it originates consents;
the non-EU country in question has agreed to cooperate in gathering evidence of irregular transactions that may breach VAT legislation.

Fighting VAT fraud

The regulation establishes Eurofisc, a network of anti-fraud experts that allows Member States to jointly process VAT data and exchange early warnings on businesses suspected of being involved in VAT fraud. Eurofisc also coordinates any follow-up action started by tax authorities following its fraud warning. Eurofisc can also cooperate with OLAF and Europol when it is required.

Electronic commerce

As part of a package of measures to modernise the EU’s VAT system and to adapt it to EU cross-border business and consumer e-commerce, Regulation (EU) 2017/2454 amends Regulation (EU) No 904/2010 by introducing rules that will increase administrative cooperation between Member States. The 2017 amending regulation ensures that supplies of services and distance sales of goods under Directive (EU) 2017/2455 (which amends Directives 2006/112/EC – see summary and 2009/132/EC – see summary) are covered. It applies from January 2021.

Among other things, the regulation requires that:

the identification number under which VAT is paid is provided in advance to allow customs authorities to check its validity when importing goods;
requests for records and administrative enquiries made by Member States to taxable persons will be coordinated by the country of identification*.

At the beginning of 2020, the Commission adopted Implementing Regulation (EU) 2020/21, concerning administrative cooperation and combating fraud in the field of VAT, and Implementing Regulation (EU) 2020/194, laying down details on the working of the VAT one-stop shop for sales of online goods.

Both implementing regulations contribute to ensuring that VAT is paid in the Member State of the final consumer, leading to a fairer distribution of tax revenues amongst Member States.

Due to the COVID-19 crisis, these new VAT e-commerce rules apply as of 1 July 2021 instead of entering into force on 1 January 2021 (Implementing Regulation (EU) 2020/1318). This additional time was necessary to allow all Member States to finalise the necessary IT systems to implement and apply those changes.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 January 2012.

BACKGROUND

For further information, see:

VAT and administrative cooperation (European Commission).

KEY TERMS

Country of identification. The Member State in which the taxable person is registered for using the mini one-stop shop system.

MAIN DOCUMENT

Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (OJ L 268, 12.10.2010, pp. 1–18).

Successive amendments to Regulation (EU) No 904/2010 have been incorporated in the original text. This consolidated version is of documentary value only.